MARKET OUTLOOK DEC 2013

MARKET OUTLOOK -  DEC 2013

The equity markets consolidated in the month of November with Nifty falling by 1.95%. Gold rose by 1% during the month while Crude Oil fell by 4.6% during the last month. FII remained net buyers in Indian equity market but Mutual Funds continued selling equities during the month. Indian Rupee has lost 1.93% against US dollar during the month.

Equity market has rallied over the last three months primarily because of two reasons. One is RBI action to contain the rupee fall by taking prudent measures and instilling confidence in the market.The second is FIIs betting on BJP win in coming Lok Sabha election. It started with investment bank Goldman Sachs upgraded Indian equity markets on hopes of a Narendra Modi-led BJP forming the next government, leading foreign brokerages CLSA and Credit Suisse too see prospects of significant gains in the market run-up to the general elections early next year. The assumption is that the new government will act in a decisive manner and introduce bold new reforms. But we need to act in a prudent manner by taking close view of the situation and maintaining proper asset allocation and follow rebalancing strategy in case of good run up of equity markets in coming months. We need to take a close watch on this assumption as election outcome is uncertain. 

On equity side we hold our advice to investors to keep buying equity mutual funds through SIP/ STP. On debt side we continue recommending Accrual based debt funds with clean portfolio and Dynamic Bond Funds with low volatility with 12-18 months time horizon.

WISHING ALL OUR CLIENTS , PARTNERS & ASSOCIATES......A VERY HAPPY DIWALI

ANNUAL CLIENT EVENT 2013

We had organised ANNUAL CLIENT EVENT 2013 at Forte Grand , Chankya Puri , New Delhi on  Oct 26 , 2013.Mr Ajay Tyagi , Fund Manager , UTI Mutual Fund was the Key Speaker. He Discussed about the Global Economy , Equity Markets & its Correlation with Indian Equity Markets.Effects of Tapering of QE by US & its effects on India.Equity valuations which look cheap at present. Equity market is likely to breakout the range it has been trading over the last 4-5 years and moreover some of the stocks and sectors are highly undervalue. Hence, it is expected for equity investments to do well over the next 5 years but asset allocation is of prime importance and one has to diversify investments over various asset classes to reduce risk. We appreciate that all of clients present there liked the event.

Event Followed by Cocktail & Dinner.

 

STAR GENERAL INSURANCE ANNUAL CONCLAVE @ LEELA ,CHENNAI 26-28 Aug 2013

                   
                   STAR GENERAL INSURANCE ANNUAL CONCLAVE @ CHENNAI 26-28 Aug 2013

Interaction With Nordea

Mr Faisel Butt - Director , Global Fund Distribution, Nordics - Denmark visited our office on Aug 22 , 2013. It was informative session as we discussed existing product range of Nordea for their global customers & process of  fund management.Its gave us insight on global fund management practices , INDIA as investment destination for overseas fund managers , current global Volatility in General & India in specific.

ICICI Prudential has come with ICICI Prudential Global Stable Equity Fund that will invest in Nordea 1-Global Stable Equity Fund -Unhedged.

For true diversification investors must invest in Global Funds after analyzing their risk tolerance.

MARKET OUTLOOK AUGUST 2013

Market Outlook  - August  2013

  

The equity markets ended negative for the month of July with Nifty falling by 1.71%. Gold rose by 14.44% during the month while Crude Oil rose by 6.43% to $103.08/barrel. WPI inflation inched higher to 4.86% in June compared to 4.7% in the previous month. FII and Domestic institutions remained net sellers for the month. Indian Rupee has continued falling against dollar during the month and US $ appreciated 2.76% against rupee to close at the level of 60.89 Rs/$.

RBI has increased the Marginal Standing Facility rate to 10.25% from 8.25% to support the falling rupee. RBI did not tinker with repo and reverse repo rate which shows that RBI tightening of monetary policy is aimed towards controlling rupee fall and does not signal reversal of policy stance. We believe that there may be short term pause by RBI in rate cuts but with one year view we expect RBI to cut rates by atleast 50 Bps. But in short term there may be huge volatility in debt funds and G Sec yields could move upwards due to rupee volatility. On strategy front we recommend Accrual based debt funds with clean portfolio and Dynamic Bond Funds having low volatility with 12-18 months time horizon. Equity market will remain range bound for next one year; hence we hold our advice to investors to keep buying equity mutual funds through SIP/ STP route. Gold has again started rising after big fall but any upside in gold should be used for exit as we do not hold positive view on gold in near term but ongoing SIPs in gold funds should be continued for long term goals like Child Marriage.

MARKET OUTLOOK JULY 2013

Market Outlook  - July 2013

The equity markets ended negative for the month of June with Nifty falling by 2.40%. Gold fell by  7.44% during the month while Crude Oil rose by 3.47% to $96.85/barrel. WPI inflation eased to  4.7% in May compared to 4.89% in the previous month. Liquidity from global markets turned negative with FII pulling out heavily from Indian debt market and equities. Domestic institutions remained net sellers for the month but quantum of selling reduced. Indian Rupee has continued falling against dollar during the month and US $ appreciated 4.73% against rupee to close at the level of 59.25 Rs/$.

RBI did not tinker with key rates in its June 17 policy review meet where most of the analysts were expecting rate cut. Though macro numbers were suggesting rate cut as inflation has eased further and GDP growth has been coming down but falling rupee and high CAD has stopped RBI from cutting rates. We believe that there may be short term pause by RBI in rate cuts but with one year view we expect RBI to cut rates by atleast 50 Bps. We see 10 Year G Sec yields correcting by 50 to 75 Bps over next 12 months but in next couple of months volatility will be higher and yields might inch up due to rupee volatility and FII negative flows. There will be pressure on rupee and debt market as Federal Reserve Chairman Ben Bernanke said the central bank would start to reduce its stimulus measures later this year if the economy is strong enough. We recommend Accrual based debt funds and Dynamic Bond Funds with 12-18 months time horizon. Equity market will remain range bound for some more time but outlook for FY 14 and FY 15 remains positive. We hold our advice to investors to keep buying equity mutual funds through SIP/ STP route. We have been advising profit booking and rebalancing of gold portfolio since November in our product update. It has corrected a lot since then. We do not hold positive view on gold in near term but ongoing SIPs in gold funds should be continued for long term goals like Child Marriage.

HEALTH INSURANCE - STAR CARDIAC CARE

Star Health Insurance has launched Star Cardiac Care Insurance policy for patients who had undergone heart surgery in the past.

Eligibility

 Any person aged between 10 years and 65 years and who has undergone for the first time PTCA (Stenting) or CABG (By-pass) between 6 months and 3 years prior to the date of policy purchase.

Special Features

Section 1: In-patient hospitalisation expenses

Ø  101 Day-care treatments covered.

Ø  Covered where the hospitalisation is for a minimum of 24 hours.

Ø  Ambulance charges for emergency transportation to hospital as per specified limits.

Ø  Pre-existing diseases covered after 48 months

Ø  Lifelong renewals

Section 2: Cardiac ailments covered after 3 months itself

Ø  Under Gold Plan, any cardiac related complications necessitating surgery/

          intervention and also cardiac medical management.

Ø  Under Silver Plan, any cardiac related complications necessitating surgery/

          intervention only.

 Pre- Medical screening: All persons proposing for this insurance should undergo   

 Preacceptance medical screening at the Company nominated centers. Cost of screening is currently borne by the company.

Tax Benefit

  Amount paid by any mode other than by cash for this insurance is eligible for relief  

        under Section 80D of the Income Tax Act.

MARKET OUTLOOK JUNE 2013

                          Market Outlook - June 2013 

The equity markets ended flat in the month of May with Nifty posting 0.94% returns. Gold fall has taken a pause in the month and ended flat during the month while Crude Oil fell by 0.88% to $93.60/barrel. WPI inflation eased to 4.89% in April compared to 5.96% in the previous month.Liquidity from global markets continued during the month but domestic institutions remained net sellers for the month. Indian Rupee has seen major fall during the month and US $ appreciated 5% against rupee to close at the level of 56.57 Rs/$.

All eyes are on RBI June 17 policy review meet where most of the analysts are expecting rate cut in the range of 25 Bps to 50 Bps because inflation has touched low of 4.89% and Q4 GDP growth number has come at 4.8%. Though macro numbers are suggesting aggressive rate cut but we believe that RBI is likely to cut rates in staggered manner and this policy meet may not take aggressive rate cut and it could be 25 Bps only. We see 10 Year G Sec yields settling in the rage of 6.5% to 6.75% over next 12 months but in next couple of months yields might inch up higher because of new paper supply. We recommend Dynamic Bond Fund with 12-18 months time horizon. Equity market will remain range bound for some more time but outlook for FY 14 and FY 15 remains positive. We hold our advice to investors to keep buying equity mutual funds through SIP/ STP route.

We have been advising profit booking and rebalancing of gold portfolio since

November in our product update. It has corrected a lot since then. Though lump sum purchase in gold should be avoided at present but ongoing SIPs in gold funds should be continued for long term goals like Child Marriage.

Mr. Navneet Munot, CIO, SBI Funds Management - Impact of Union Budget 2013

http://www.youtube.com/watch?v=6QjtMEcxc9g&feature=share&list=UUsVLOwREXwjLk42aQ4HeqtQ

Union Budget 2013 – Highlights

The Union Finance Minister Mr. P. Chidambaram presented UPA Government’s budget for 2013-14 in Lok-Sabha on 28th February 2013. The key focus of this budget has been bringing down the fiscal deficit hence avoiding the risk of credit rating downgrade. It was a challenge for FM to reduce deficit concerns without jeopardizing growth. Finance Minister has kept fiscal deficit target at 4.8% for FY 2013-14 and seeks to close current financial year at fiscal deficit at 5.2%. Finance Minister raised concern about current account deficit which continues to be high due to excessive dependence on oil, coal and gold imports and slowdown in exports. Ahead of next year's General Elections, Finance Minister P Chidambaram did not tinker with the Income Tax slabs or rates while presenting the Union Budget 2013-14 in the Lok Sabha. As part of his tax proposals, he gave a benefit of Rs 2,000 to individual tax payers with taxable income of up to Rs 5 lakh. A surcharge of 10% on earning over Rs. 1 crore in a year has been imposed on individuals, HUFs, firms and entities with a similar tax status. The Finance Minister announced that first-home buyer who takes a loan for an amount not exceeding Rs 25 lakh would be allowed an additional deduction of interest of Rs 1 lakh to be claimed in assessment year 2014-15. But in bad news for consumers, the Finance Minister made mobile phones, cigarettes and luxury vehicles costlier by hiking duties on these products.

Followings are the key highlights of the budget:

 Fiscal Deficit/ Borrowing: Fiscal deficit target has been kept at 4.8% of GDP for FY 13-14. Fiscal deficit seen at 5.2% of GDP in current financial year. Gross market borrowing seen at 6.29 trillion rupees in 2013-14. Net market borrowing seen at 4.84 trillion rupees in 2013-14. Govt. to buy back 500 billion rupees worth of bonds in 2013-14.
 Inflation: Food inflation is worrying, will take all steps to augment supply side. Headline WPI inflation has come down below 7% and core inflation to 4.2%.

 Taxation:

•      Proposes surcharge of 10% on rich taxpayers with annual income of more than Rs. 1 crore a year.
•      No change in slabs and rate for personal income tax.
•     Tax credit of Rs 2000 to be provided to every person to having income of up to Rs 5 lakh.
•     5 to 10% surcharge on domestic companies whose taxable income exceeds Rs 10 crore.
•     First housing loan up to Rs 25 lakh would get additional deduction of interest of up to Rs 1 lakh in                  
•     FY 2013-14.
•     DDT (Dividend distribution tax) on debt mutual funds has been raised from 12.5% to 25%.
•     Commodities transaction tax levied on non-agriculture commodities futures contracts at 0.01%.
•     Modified GAAR norms to be introduced from April 1, 2016.
•     Direct Taxes Code (DTC) bill to be introduced in current Parliament session.
•     No change in basic customs duty rate of 10% and service tax rate of 12%.
•     Import duty on rice bran oilcake withdrawn.
•     Import duty raised on set-top boxes from 5 to 10% to safeguard interest of domestic producers.
•     Import duty raised from 75 to 100% on luxury vehicles.
•     Duty free limit on gold raised to Rs 50,000 in case of male and Rs 100,000 in case of female.
•    Specific excise duty on cigarettes and cigars raised by 18%.
•    Excise duty on SUVs to be increased to 30% from 27%, SUVs registered as taxis exempted.
•    Duty on mobiles above Rs 2,000 raised from 1% to 6%, based on their maximum retail prices.
•    Service tax to be levied on all AC restaurants.
•    One time voluntary compliance scheme for service tax defaulters to be introduced. Interest and         penalties to be waived.
•  Education cess to continue at 3%.
•  TDS of 1% on value of properties above Rs 50 lakh. Agriculture land exempted.
•  Securities Transaction Tax (STT) reduced on equity future, mutual fund.
•  Propose to impose withholding tax of 20% on profit distribution to shareholders.
•  Rajiv Gandhi Equity Scheme will be liberalised to allow first time investor to invest in Mutual Fund  and equity.
•  Corporate Sector and Markets
•  Tax free bonds issue to be allowed up to Rs 50,000 crore in 2013-14 strictly on capacity to raise  funds from the market.
•  Four Infrastructure debt fund have been registered.

 Investor with stake of 10% or less will be treated as FII; any stake more than 10% will be treated as FDI.
 FIIs will be allowed to participate in exchange traded currency derivatives.
 Foreign institutional investors (FIIs) can use investments in corporate, government bonds as collateral to meet margin requirements
 Insurance, provident funds can trade directly in debt segments of stock exchanges


Market Outlook: We see this budget as a path towards fiscal consolidation. The Finance Minister has tried to increase growth rate while maintaining fiscal prudence. He has tried to cut the subsidy outgo and reduce fiscal deficit but at the same time to keep the growth momentum going he has increased the plan expenditure by almost 30% to Rs.5.55 lakh crores. This will pave the way for RBI to cut rates going forward. It becomes imperative for RBI to cut rates as GDP growth rate for Q3 has come down to 4.5% and moreover RBI can take comfort in easing inflation below 7%. On debt side, we see G Sec yields coming down over next 1 year though there may be short term rise in yields because of shifting of some funds from G Sec to Bank CDs as tactical move. We recommend Bond Fund/ Income Funds for debt allocation with 12-18 months time horizon. Equity market will remain range bound for some time but outlook for FY 14 and FY 15 remains positive as corporate earnings will improve on the back of falling interest rates and improved outlook on Indian economy. On equity side we continue with our advice to invest through SIP/ STP mode in staggered manner.

PineBridge Investments...

From L to R : Mr Pramod Sharma : Director V Client Wealth , Mr Huzaifa Husain : Head Equities PineBridge Investments , Mr Sidhhartha Singh CEO PineBridge Investments, Mr Prashant Maurya  : Director V Client Wealth. 

We had visited & interacted with PineBridge Investments Team at their Corporate Office Jan 4 , 2013 in Mumbai. 

Major Emphasis of discussion was on Fund & Risk  Management as a process by the AMC.

All these interactions with Fund Managers at their offices was to understand their  working so that our advisory process should also includes the Qualitative Inputs with the Quantitative one.

Interaction with Edelweiss Mutual Fund

From L to R : Mr Pramod Sharma : Director V Client Wealth , Mr Vikaas M Sachdeva : CEO Edelweiss Mutual Fund , Mr Rashesh Shah , Chairman and CEO  Edelweiss Group , Mr Seemant Shukla : Country Head Edelweiss Mutual Fund , Mr Prashant Maurya  : Director V Client Wealth 


We had visited & interacted with Edelweiss Mutual Fund Team on Fund Management Philosophy &  Process on  Jan 2 -3 , 2013 in Mumbai. Points of Discussion includes Fund Management , Operations , Compliance , New Marketing Initiatives & Product Development.

At the End Mr Rashesh  Shah has expressed his views on the Markets & Economy .

All these thought sharing was for the Final Benefit of Investors &  Clients.